1 Is Now Greater Than 2?

A large way in which investments help companies is through mergers and acquisitions. I touched on this in my last blog post, but I’d like to focus on them here since they are a very helpful way for companies successful by using the world of investments. Basically, a merger is when two companies similar in size decide to join together to form a new company with a new stock and everything. An example of this is when Chrysler and Daimler-Benz merged to create DaimlerChrysler. An acquisition on the other hand though is when one larger company takes over another company. The typically larger company “buys out” the other typically smaller company. An example of this can be seen with the acquirer ,Comcast Company, buying out the target ,Time Warner Cable, back in February. Through this acquisition Comcast not only gained control of Time Warner the company, but they also gained control of all of Time Warner’s assets and customers.

Mergers only occur when both companies agree to merge into one company, thus mergers do not happen all that often in the marketplace. Acquisitions however though do occur more regularly than mergers because the acquirer simply takes over the target company.

Mergers and acquisitions are investment techniques that greatly help the success of a business. The companies who acquire businesses in acquisitions and companies that decide to merge together greatly benefit due to the fact that those two companies are now just one company. According to Ben McClure, “The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies.” This shows that when two companies become one, both the company and the shareholders benefit and have success.